Clear mortgage debt or....

Sunshine_Rainbows

I've got 80k left on our mortgage with the current fix (1.59%) ending at the end of December.

Mortgage is currently 360pm and I'm in a position to make a bulk payment in December of 50k, so there'll be just 30k remaining. 

Im wondering which of these 2 options is more beneficial...

1. Switch to the svr (7%) for a short time, paying about 750 a month until its all gone. We estimate we can clear the full balance by April 2025, so we'd pay out around 4 months at the svr.

Or

2. Remortgage that 30k for a really long period, say 25 years, paying something like £100 a month and overpay now and then and stick the extra £650 we would usually spend in a savings pot?

Yorkie1

For option 1, is there a zero missing on your payment of £750? Four months of that would equal £3K, not £30K.

Many people like the idea of having paid off the mortgage, as it gives future security against unexpected life events.

Remortgaging for 25 years is a long time to be paying interest when it might not be necessary.

If you did pay it all off by April 2025, you'd then be able to put it all into savings - four months of SVR isn't much or long in the great scheme of things.

Have you considered your bigger picture, e.g. pensions, emergency funds, etc., as well as using some of the funds towards the mortgage?

Hoenir

A rethink required  rather than the 2 options presented. 

Overpaying a lump sum when the fixed term ends shortly does make sense though. 

silvercar

I’d be looking for an offset mortgage, so the money would be used to avoid paying interest, but the capital would be available for emergencies etc

Newbie_John

So you're saying that you will be able to pay remaining £30k by paying £750 a month in 5 months? That will take at least 2 years to do so.. April 2027? 

1) If Apr 2025 is correct and you're not going to use your emergency savings then option 1 is OK
2) If it's Apr 2027 then I would call the bank and ask when you can overpay £50k without any fees - some banks allow in last week, some when you fix ends - overpay £50k - then fix for 2 years - pay monthly as usual and aim to pay off in full in Apr 2027
3) if these are all savings you have and you say "we" I would consider opening ISA each and put there 2x£20k, then similar in April 2025 - roughly speaking ISAs offer 5% (but they will go down) or fixed at 4.5% - and this could be better rate then the mortgage itself - so you'll have easy access money and later in the future when you've saved enough pay it all